Monday, July 25 2016

VietNamNews

Lessons for Viet Nam in slowing global economy

Update: February, 23/2016 - 09:06

by Jim Yong Kim*

In just three decades, Viet Nam has been transformed from one of the world's poorest nations to one of the world's greatest development success stories.

The Doi Moi economic reforms of the late 1980s helped the country move away from its centrally planned economy and toward a globally oriented market economy. This contributed to a stunning average growth rate of 7 per cent between 1991 and 2010.

Despite this progress, in the current global economic slowdown, Viet Nam's gains are fragile.

One third of the country's population – 30 million people – are vulnerable to falling back into poverty. Our joint report with the government of Viet Nam, called Viet Nam 2035, finds that Viet Nam will benefit from more reforms to boost its economy and reach a growth rate that will allow it to achieve upper-middle-income status within the next two decades.

This report was prepared with input from Vietnamese and international experts. It outlines a series of steps that Viet Nam can take to achieve its ambitious goal of becoming a modern, industrialised nation in a single generation.

The report has three clear messages:

First, Viet Nam will need to grow annually by at least 7 per cent to become an upper-middle-income economy in the next two decades. This growth can be supported by increased innovation, efficient and sustainable urbanisation and resilience to changing climate patterns. It is important to establish a more efficient and competitive private sector.

Viet Nam's private sector will thrive with fewer barriers to competition and more efficiently allocated capital and land resources. These steps will help the country take advantage of new trade opportunities presented by agreements like the Trans-Pacific Partnership.

But growth alone is not enough to improve the lives of all people in Viet Nam. The report's second message is to build on the country's impressive record of equity and social inclusion. The findings argue for more inclusion of marginalised groups and better services for Viet Nam's aging and urbanising middle class.

In just 30 years, Viet Nam has reduced extreme poverty from 50 per cent to roughly 3 per cent – an astounding accomplishment. It now has the opportunity to focus on the last 3 per cent, who are mostly ethnic minorities in hard-to-reach areas – populations that also happen to be the most vulnerable to natural disasters, climate change and economic shocks. Viet Nam is particularly exposed to the adverse effects of climate change; much of its people and economic assets reside in low-lying areas.

We're helping to address this challenge through an upgrading project that's turning under-performing urban areas into vibrant, more climate-resilient communities. Nearly 1,000 kilometres of new or upgraded drains and roads have helped to reduce flooding and improve environmental conditions for 200 low-income neighborhoods to date – aiding 2.5 million mostly poor people.

It's also critical for children from poor households to have better access to education, nutrition, and sanitation services. Other reforms include a more sustainable pension system, higher completion rates of upper-secondary school, and universal health coverage.

The report's final message relates to governance. Viet Nam will have a greater chance to achieve its goals for 2035 with comprehensive governance reform. While we've seen great progress on this front, Viet Nam aspires to be an even more modern and democratic society. These steps will depend on institutions that are accountable, transparent, and firmly rooted in the rule of law.

There are clearly challenges ahead, but I firmly believe that Viet Nam can achieve its ambitious reform agenda if the country continues to unlock the potential of its domestic private sector and carry out the recommendations of this report. We stand ready to support Viet Nam's 2035 vision of becoming an even more just, prosperous, and democratic society and an example to countries around the world.

*Jim Yong Kim is president of the World Bank Group.

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